Mercedes-Benz plunges 8% intraday! The company issues profit warning, this year's profit may be "significantly lower" than last year

On Friday, Mercedes-Benz European stocks opened significantly lower and continued to decline, falling by over 8% during the trading session, marking the largest intraday decline since June 2020. The stock price hit a new low for the year, dropping by over 24% from its yearly high.

What exactly led to the collapse of Mercedes-Benz?

Recently, the Mercedes-Benz Group revised its 2024 performance guidance, stating that the macroeconomic environment has further deteriorated. It is expected that the full-year adjusted ROS (Return on Sales) for automobiles will be between 7.5% and 8.5%, down from the previous forecast of 10% to 11%. EBIT (Earnings Before Interest and Taxes) for this year is expected to be "significantly lower" than the previous year.

Analysts at UBS stated that the adjustment in Mercedes-Benz's outlook "is not surprising", but the magnitude of this warning compared to peers may trigger investor panic and lead to further downgrades.

"The profit warning from MBG (Mercedes-Benz Group) is larger than BMW's, and it is not related to a large-scale recall, which will confuse the market about the potential profit capabilities and capital allocation for 2025."

Ola Källenius, CEO of Mercedes-Benz, stated on Friday that Mercedes-Benz will "do everything possible" to improve performance, including launching new products to boost sales. "We will actively sail with the wind, rather than just watching the wind."

Sluggish sales, the automotive industry is facing unprecedented challenges

In a statement on Thursday, Mercedes-Benz stated that the adjustment was triggered by "further deterioration in the macroeconomic environment." "Overall, it is expected that the sales mix in the second half of 2024 will remain unchanged from the first half, thus falling below the initial expectations."

In the European region, Mercedes-Benz's deliveries dropped by 13% in August and 3% from January to August. Electric vehicle sales were particularly bleak, with deliveries in Europe dropping by 36% in August, and market share falling from 21% to 14.4%.

Mercedes-Benz's profit warning sounded the alarm for the German automotive industry, reflecting obstacles to its strategy of entering the high-end market and highlighting the significant challenges faced by this pillar industry in Germany's electrification transformation.

As a representative of German industry, the automotive sector is facing unprecedented challenges. Germany's two automotive giants - Volkswagen and BMW - both saw a decline in profit margins in the second quarter.

Volkswagen is considering closing its factories in Germany for the first time and abolishing wage agreements to further reduce expenses. Deliveries in the Chinese market for Volkswagen dropped by 19% in the second quarter.

Affected by the brake system recall incident, the BMW Group also lowered its full-year profit forecast to 6% last week, down from the previous forecast of 8%-10% In the second quarter, BMW's revenue was €36.94 billion, a year-on-year decrease of 0.7%, and below the market's expected €37.99 billion. Sales in the Chinese market in the first half of the year dropped by 4%.

Today, BMW Group's stock price also opened low and fell more than 4% along with Mercedes-Benz. Stock prices of European automotive giants such as Volkswagen and Porsche all opened low and fell today.

In addition, with the European Union set to implement stricter vehicle emission regulations next year, the decline in sales of electric vehicles poses a risk of hefty fines for European automakers.

Yesterday, the European Automobile Manufacturers' Association (ACEA) urged the EU to postpone the new carbon emission targets (approximately 95 grams of carbon dioxide per kilometer per vehicle) and called for "urgent and meaningful action" to reverse the decline. Top automakers such as Volkswagen, BMW, and Renault have suggested delaying the targets, otherwise they face the risk of billions of euros in fines